Mark-To-Market Manipulation Hides $90 Billion Losses For UK Banks

Some have attributed the resurrection of the financial markets (or more appropriately the banks) from the March 2009 lows to the IASB/FASB changes to factual to fantasy accounting. The Telegraph reports today that from PIRC's and the Bank of England's Financial Policy Committee that while banker bonuses continue to rise (for now), 'hidden' losses among UK banks could total GBP60 Billion (USD 90 Billion). HSBC topped the list with GBP10.4 Billion in bad debts that have yet to be written off and while the 'accounting' bodies are suggesting they will address criticism of this farce, as one analyst notes, they "can still make unprofitable lending appear profitable." Regulators expect to hear plans from lenders on how they intend to fill these holes before the end of the month to coincide either with the FPC’s meeting on March 19 or a statement scheduled for March 27. While outright recaps are unlikely, banks are expected to
restructure and set out plans to raise their capital levels over the next
couple of years. More fantasy...

PIRC has calculated the amount of bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.

HSBC, which is the biggest bank by assets, was shown to have £10.4bn of hidden losses, the Royal Bank of Scotland has £9.4bn, and Barclays has £7.3bn. Lloyds Banking Group has £2.5bn and Standard Chartered £2.2bn. Together the undeclared losses total £31.8bn.

The research shows the distorting impact the accounting rules, which allow bad loans to remain hidden, have on bank results.

...

Apart from Basel rules that require banks to declare half the expected losses over a year, bad loans and expected losses do not appear in the banks’ accounts under International Financial Reporting Standards (IFRS).

Last week the London-based IASB, which sets accounting rules for all listed companies in a raft of countries, agreed to address criticism of IFRS with plans for tougher capital requirements against expected losses. However, the provisions only have to be for losses expect over 12 months. The US Financial Accounting Standards Board (FASB) changed its rules in December to demand provisions for the life of the loan, as UK GAAP did too.

Tim Bush, head of financial analysis at PIRC and long-term critic of IFRS, said: “The 12 months expected loss is neither here nor there. It is clear that bad loans in RBS and HBOS on lending in 2006 and 2007 took four or five years to come through, the 12 month view can still make unprofitable lending appear profitable... ”

The warning follows regulatory pressure to force the UK’s banks and building societies to disclose their hidden losses, which supervisors at the Bank of England have suggested could total as much as £60bn. Lenders have just weeks left to clarify present the regulators with plans to fill the holes.

...

An announcement on the industry’s response is expected before the end of the month to coincide either with the FPC’s meeting on March 19 or a statement scheduled for March 27.

Outright recapitalisations are unlikely, though. Banks are expected to restructure and set out plans to raise their capital levels over the next couple of years.

Mark-to-market accounting is not necessary for SIFIs (Systemically Important Financial Institutions) because they are able to sell their liabilities to central banks around the world at more appropriate valuations. This is what doomer libertarians simply do not understand. I know many on this site do not want to hear this, but these banks are simply too big to fail, and thankfully central banks around the world recognize this.

What makes anyone think that gold would make any difference. It's not the medium, its the swine that are in charge of the scam that need to broiled. They could rig a scam using guano as money. Gold ain't shit except a way to poison vast areas of rainforest. Clue in.

Fiat is a good functional Medium of Exchange. The problem comes when we are told to hold it as a Store of Value. As an SOV, electrons and paper just don't cut it. Ultimately the world will figure this out and seperate the MoE from the SoV functions. Until that happens we are stuck with the great lie: 'the dollar is as good as gold'....never was, never will be...

Fractional reserve banking is the issue. They are lending out money they dont have; lent long and borrowed short. If they were only allowed to loan out money what was not on-demand deposits, this would not be an issue.

Agreed. Everyone hates on fractional reserve banking, but it's really not having enough in the vaults to back the demand deposits that's the issue. If they stopped lying to the demand depositors and depositors knowingly took the risk to be time depositors, who am I to say that two parties that aren't lying to each other shouldn't do a deal?

"They were just kids bankers out having fun, not kids bankers into gangs, no drugs involved," Williamson said. "They're just kids bankers doing what we all did at one time."

No mo' consequences.

The 19-year-old woman behind the wheel of an allegedly stolen SUV when it crashed into a pond, killing six friends, didn't have a valid driver's license, according to a report on the crash released Tuesday.

Lisa Williamson said her son, Brandon Murray, and his best friend, Ramone White, both 14, each told their parents they were sleeping at the other's house but then ended up at what the young folks call a :kick-back": a small gathering of friends, less than a party but more grown-up than a sleepover. Something to do on weekends after the mall closes and the last movie lets out.

They were probably trying to catch a ride home in the stolen SUV.

"They were just kids out having fun, not kids into gangs, no drugs involved," Williamson said. "They're just kids doing what we all did at one time."

Y'all think it's just European Banks?Hows about any banks world wide?How's about any supranational fund, pension schemes, governmental trusts funds?Ill St Pensions, CalPers, US Indian Trust Funds. SS, whatever?

Everyday that goes by just seems to bring more errors, problems, glitches, rogue personnel (always way down the ladder, BTW) that one might, just might conclude that the whole system has been jury rigged, broken, that normalcy is but a mere illusion.I sure hope not!Pray for the best, plan for the worst.

You seem to realise that these pension funds are ALL locked into the holy market of markets of the bankstas; our best and brightest libertarians with big bonuses.

Nowhere to run nowhere to hide! and when the churn gives no return the debt keeps piling up and the pensions start to melt like under global financial warming...Who says that financial warming is restricted to ONE continent?

Lol, the delusion of libertarian minds; never in my back yard! Let those euros burn in Italy not in our back yard.

There is no such thing as bank losses since the central banks will buy anything that looks remotely like a steaming pile of shit.

Anybody notice how Corelogic's stats on residential real estate shadow inventory is at 2.3 million units as of October 2012 which is a rise from April 2012 with 1.5 million units? Of course both reports highlighted declining inventory but no one pointed out that the base was from the prior year, not from the last report. More spin as usual.

Just a usual day in the land of OZ, all fantasy and make believe. Can someone please drop a house on Bernanke?

Why must the STAWK market be propped up at all cost? Because the crony banks own (directly or indirectly) the vast majority of stocks and so any major fall in the stock market would cause a mark to market and derivative catastrophic cascade.